Net Investment Income (NII)
Private Credit glossary · Fund Structures, Returns & Economics
Definition
A BDC's core recurring earnings: NII = Total Investment Income - Operating Expenses - Interest Expense. The primary source of BDC dividend payments and the key metric for evaluating dividend sustainability — if NII per share falls below the declared dividend, the dividend is being funded from realized gains or returns of capital, an unsustainable bridge. NII excludes realized gains/losses (one-off) and unrealized depreciation (non-cash).
Net Investment Income (NII) in plain English
Net Investment Income is a BDC's true "take-home pay" from its everyday business of lending: all the interest and fees it collects, minus what it costs to run the firm and minus the interest on its own borrowing. It matters because this is the real, repeatable money that funds the dividend — so investors watch whether NII per share covers the dividend being paid out. If the dividend is bigger than NII, the firm is dipping into one-time profits or handing back investors' own money, which can't last. It's like judging whether someone can afford their rent from their steady paycheck, not from occasionally selling off furniture.
Also called: NII
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